Gas prices in the U.S. have surged over the last year. Many people wonder why gas prices are going up. Some people have even been putting the blame on the Biden administration. While the Biden administration isn't strictly responsible for rising gas prices, it can take action to bring gas prices down.
First, it's important to understand that gas prices in the U.S. are market-linked. While factors like the crack spread, refiner margins, and taxes also impact gas prices, crude oil prices are the biggest driver.
Why gas prices are going up in the U.S.
Gas prices in the U.S. have been going up due to rising crude oil prices in international markets. Higher crude oil prices trickle down to higher gas prices that you pay at gas stations.
Is Biden responsible for higher gas prices?
It's customary to blame the government for higher gas prices. Although the federal government's expansionary fiscal policy fuels inflation in general, the Biden administration isn't directly responsible for higher gas prices.
How Trump handled crude oil prices
Former President Trump tried to influence crude oil prices at least twice during his tenure. Amid the rise in crude oil prices in 2019, Trump said that he called OPEC to take measures to bring down crude oil prices. As crude oil plummeted in 2020 amid the COVID-19 pandemic, Trump was reportedly instrumental in getting the OPEC+ block to agree to record production cuts.
The record production cut by OPEC+ helped bring stability in crude oil markets and WTI futures, which briefly turned negative in April 2020, and helped them bounce back. Can Biden take measures to bring crude oil prices down?
Gasoline prices when Biden took office in January
Gas prices in the U.S. averaged $2.379 per gallon in the fourth week of January when Biden took office. The current average is around $3.269 per gallon, which means that gas prices have surged over 37 percent under Biden's presidency. The rise in gas prices is also stoking inflation, which is running at multi-year highs.
What can Biden do to bring down gas prices?
Biden can do several things to bring gas prices down in the U.S. He can cajole the OPEC+ block to increase production. However, it’s doubtful if OPEC+, especially Saudi Arabia and Russia, would follow his “advice.” Trump was friendly towards the Middle East countries and even overlooked the killing of Jamal Khashoggi.
Secondly, as a structural solution, Biden can work towards a Nuclear Deal with Iran. A deal with Iran would help bring more barrels of oil into the market which would help bring down the prices.
Biden could also order to release more barrels from the SPR (Strategic Petroleum Reserve). Many people are skeptical that he would make such a decision. Finally, blocking the oil exports could help bring down crude oil prices and by its extension gas prices in the U.S.
However, that could be detrimental to U.S. energy exports in the long term and dent its image as a credible supplier. It could also hit the electoral prospects in oil-producing states.
The Biden administration could also hasten the new drilling projects. However, the move would go against the stated policy of pivoting towards green energy. Re-joining the Paris Climate Deal was among the first decisions that Biden made and he can’t be seen going back towards fossil fuel so soon.
The Biden administration is trying to be the flagbearer of efforts to curb global climate change. Overall, Biden is stuck between a rock and hard place when it comes to rising gas prices.